Eminent Domain 101:
Where Are We and What Does the Future Hold?
ACWA 2008 Spring Conference & Exhibition
May 8, 2008
K. Erik Friess, Rick E. Rayl, and Meg Catzen-Brown
Nossaman Guthner Knox & Elliott LLP
© Copyright, 2008 Nossaman Guthner Knox & Elliott, LLP. All Rights Reserved.
The information contained herein does not constitute a legal opinion and should not be
relied upon by the reader as legal advice or be regarded as a substitute for legal advice.
An Introduction:
Who are We and Why are We Here?
ƒ
Eminent domain lawyers with 33 years of collective
experience
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We deal with these issues every day
ƒ
We have tried cases representing both public
agencies and landowners
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Over the years, our practice has been nearly evenly
split between agency and landowner work
ƒ
We do work “in the trenches” of legislative reform
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An Introduction:
What are We Going to Talk About?
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Brief Introduction to Eminent Domain
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Setting the Stage for Recent Reform Efforts:
the Kelo Case
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Propositions 90, 98 & 99: What are They About?
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Legislative Reform: Recent and Pending
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Nuts & Bolts of an Eminent Domain Case
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Traps for the Unwary
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Eminent Domain Overview
ƒ Condemnation? Eminent Domain?
What is it?
ƒ Who can use it?
ƒ What is it Good for?
ƒ What is “Just Compensation”?
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Eminent Domain: What is it?
ƒ
Eminent domain is the power of the sovereign (the
government) to take property for “public use” -- without
the owner's consent -- upon paying just compensation.
ƒ
Under the California Constitution, the power of the
government to take private property is largely unlimited,
and its determination to do so is conclusive, subject only
to requirement that the take be: (i) “for public use”; and
(ii) “after just compensation.” (Cal. Const., art. I,§ 19.)
ƒ
The theory is that the sovereign (the government) holds
the ultimate and superior title; our Constitution limits that
power by requiring the payment of just compensation.
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Eminent Domain: Who Can Use It?
ƒ
An Entity Can Only Exercise the Power of Eminent
Domain if the Legislature has Granted that Power.
ƒ
Examples:
• State Agencies (e.g., Caltrans)
• Special Districts (e.g., water, irrigation, library, cemetery)
• Cities and Counties
• Redevelopment Districts
• Public Utilities
• Quasi-Public Entities (e.g., non-profit colleges and
hospitals)
• Private Persons
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Eminent Domain:
What is it Good For?
ƒ Must be for a “Public Use” – but the Term is not well defined by
the Constitution or by Statute.
ƒ Water-Related Uses Include:
• Reservoirs
• Pipelines
ƒ Other Traditional Public Uses Include:
• Roads
• Schools
• Electrical Utilities
ƒ Non-Traditional Uses Include:
• Environmental Mitigation
• Acquisition of a Professional Sports Team
(the Oakland Raiders)
• Redevelopment
7
“Just Compensation”
ƒ
Just Compensation is defined as “fair market value”:
(Code Civ. Proc., § 1263.310.) (The statutory definition of
“fair market value” is somewhat different than the
definition appraisers usually use.)
ƒ
Objective Test: Fair market value is an objective
standard; evidence that an owner has a special affection
for the property, or that the property possesses unique
value to the owner, is not considered. (E.g., it doesn’t
matter that Farmer Brown’s family has owned the property
for generations; it is still valued objectively.)
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Eminent Domain: An Example
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Eminent Domain Reform
ƒ What Triggered the Efforts Toward Eminent
Domain Reform?
ƒ What Reform has Already Occurred?
ƒ What Further Reform can be Expected?
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Eminent Domain Reform
The Triggering Event:
The Kelo Decision
“This has nothing to do with me. I’m nothing, I’m a nobody.
This is every U.S. citizen, every American. No homes, no properties, no
farms. Nothing is safe anymore.”
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The Kelo Decision:
The Broad View Prevails
ƒ
ƒ
Kelo decided two questions:
1)
Is economic revitalization, without blight, a constitutional public
use for private property taken by eminent domain;
2)
How much scrutiny should the Court give to a legislative
determination of public use?
The Court held that:
1)
Economic revitalization is a constitutional public use of taken
private property, and
2)
The Court will give deference to determinations of public benefits
by public agencies.
12
Kelo v. New London:
The California Reaction
ƒ Kelo DID NOT CHANGE California law: Art. I, Section 19 of
Cal. Const. allows some use of eminent domain for incidental
private purpose, e.g., redevelop blighted areas
ƒ But, PUBLIC PERCEPTION is that it did.
ƒ RESULT:
• Media firestorm
• Increased scrutiny of eminent domain use by local agencies
• Gave property rights advocates a platform
• Legislation/Initiatives
• And, Ultimately, Propositions 90, 98 & 99
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Tales from the
Trenches, Part 1
_________________
Legislative Response to
Kelo & the Key Players
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Legislative Response to Kelo
SCA 15 – McClintock
SCA 20 – McClintock
AB 590 – Walters
AB 1990 – Walters
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Legislative Response to Kelo
SB 53 – Kehoe
SB 1206 – Kehoe
SB 1650 – Kehoe
SB 1210 – Torlakson
SCA 24 – Torlakson
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Proposition 90 at a Glance
Dubbed the “Save Our Homes” Initiative
• Stated purpose was to prevent government from
condemning private property and turning it over to
another private owner
• Would have, if upheld, likely accomplished that goal
• If the condemning agency ever wanted to change the
public use, would have had to offer property back to
original owner
ƒ BUT, Proposition 90 went well past this
publicly-touted goal . . .
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Proposition 90 at a Glance
Other, less known aspects of Proposition 90
ƒ Applied to all agencies and all public works projects
ƒ Applied to all pending eminent domain cases
ƒ Changed the way all condemned property is valued
ƒ Could have made actionable virtually any governmental
conduct that causes damage to property
ƒ Could have rendered preservation of open space cost
prohibitive
ƒ Could have made any government conduct that impacts
businesses actionable
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Support for Proposition 90
21
Proposition 90:
What Happened?
ƒ Millions spent on campaign
ƒ Became one of the “Hot Election Issues”
ƒ Narrowly defeated at polls after showing a strong
lead in polling data
ƒ Ultimately, gave rise to Propositions 98 & 99
22
Proposition 90:
Polling Data
Datamar, Inc. polling data:
ƒ Support: 61% (September) and 56% (October)
ƒ Opposed: 24% (September) and 30% (October)
ƒ Undecided: 15% (September) and 14% (October)
23
Proposition 90:
Polling Data
70
60
50
40
July (Field Poll)
September (Datamar)
October (Datamar)
30
20
10
0
Yes
No
Undecided
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Election 2006: Eminent Domain and
Land Use Reform Measures
State
Type of Reform
Result
Arizona
Eminent domain & regulatory takings
Pass (65%)
California
Eminent domain & regulatory takings
Fail (48%)
Florida
Eminent domain
Pass (69%)
Georgia
Eminent domain
Pass (82%)
Idaho
Eminent domain & regulatory takings
Fail (26%)
Louisiana
Eminent domain
Pass (55%)
Michigan
Eminent domain
Pass (84%)
Nevada
Eminent domain
Pass (63%)
New Hampshire
Eminent domain
Pass (86%)
North Dakota
Eminent domain
Pass (68%)
Oregon
Eminent domain
Pass (67%)
South Carolina
Eminent domain
Pass (84%)
Washington
Regulatory takings
Fail (42%)
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Do We Still Need Reform?
Seven Eminent Domain Reform
Bills Signed Into Law Since Kelo
Senate Bill 1650:
ƒ
Limits the ability to change a public use
ƒ Must re-sell property to original owner after 10 years
of no public use
ƒ Lease-back to owner requirement added
Senate Bill 1210:
ƒ
Appraisal fees required to be offered to owners
ƒ Limits pre-judgment possession
26
Do We Still Need Reform?
Seven Eminent Domain Reform
Bills Signed Into Law Since Kelo
Senate Bill 1206:
ƒ
Narrows definition of “Blight”
ƒ There will be increased state oversight of
redevelopment
ƒ Easier to challenge redevelopment decisions
Senate Bill 53:
ƒ
Requires finding of significant remaining blight before
redevelopment agency can extend time to commence
eminent domain proceedings
27
Do We Still Need Reform?
Seven Eminent Domain Reform
Bills Signed Into Law Since Kelo
Senate Bill 1809:
ƒ
Tightens recording time limits for filing descriptions of
the land within a redevelopment project area
Assembly Bill 1322 (October 2007):
•
Requires Department of Transportation to Provide a
Copy of All Appraisals Performed or Obtained by the
Department to the Owner of the Property
•
Requires Property Owner to Provide a Copy to the
Department of Any Appraisals Performed of Paid for by
the Department That Are First Provided to the Property
Owner
28
Do We Still Need Reform?
Seven Eminent Domain Reform
Bills Signed Into Law Since Kelo
ƒ Senate Bill 698 (October 2007):
ƒ
Agency Must Provide Defendant Property Owner with
Informational Pamphlet at the Time of Sending an
Offer to Purchase
ƒ Declaration Stating Facts Supporting Hardship
Required if Defendant’s Written Opposition to Motion
for Prejudgment Possession Based on Hardship
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Tales from the
Trenches, Part 2
_________________
Propositions 98 & 99
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Legislative Reform Efforts
ƒ
What happened (or did not happen) last year?
¾ SB 698 - Torlakson
¾ AB 1322 - Duvall
¾ ACA 2 - Walters
¾ SCA 1 – McClintock
¾ AB 887 – De la Torre
¾ ACA 8 - De la Torre
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Propositions 98 & 99
ƒ Proposition 98: California Property Owners
and Farmland Protection Act
(Howard Jarvis Taxpayers Association)
ƒ Proposition 99: Homeowners and Private
Property Protection Act
(League of Cities)
32
Proposition 98
33
Proposition 98:
A Practical Look
ƒ Promoted by the Howard Jarvis Taxpayers
Association
ƒ Known as “Son of Proposition 90”
or “Proposition 90 2.0”
ƒ Highly Controversial, Seeks Fairly Radical
Change
ƒ Contains Significant, Non-Eminent Domain
Provisions
34
Proposition 98:
A Practical Look
ƒ Re-Defines and Narrows “Public Use”
ƒ Re-Defines and Expands “Just Compensation”
ƒ Expands Landowner Right to Recover Attorneys’
Fees
ƒ Eliminates Waiver of Claims Through Withdrawal
of Deposit
35
Proposition 98:
The Not-So-Hidden Agenda
ƒ One Key Goal: Eliminate Rent Control
ƒ Majority of Proposition 98’s Funding (Upwards of
80%) Appears to Come from Landlord Groups
ƒ Proponents Dismiss Criticism, Claiming Rent Control
is Nothing More than Eminent Domain Without Just
Compensation
ƒ Scope Could go Beyond Eliminating Actual Rent
Control, Threatens “Inclusionary Housing”
Requirements (i.e., Low Income Housing Rules)
36
Proposition 98:
Unique Impacts on Water Agencies
ƒ Proposition 98 Contains Some Provisions that May Impact
Water Agencies Uniquely
ƒ Section 3, subd. (b)(3)(ii):
Defines as a “private use” (i.e., not a proper subject for
condemnation) the “transfer of ownership, occupancy or use of
private property or associated property rights to a public agency
for the consumption of natural resources or for the same or a
substantially similar use as that made by the private owner”
ƒ Two Concerns:
¾ Unclear how broadly “for the consumption of natural resources”
will be construed, whether it will eliminate condemnation for
reservoirs
¾ Prevents government from condemning existing private water
facilities if facility will remain as the same public use
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Proposition 98:
Unique Impacts on Water Agencies
ƒ With regard to “consumption of natural resources”:
California Farm Bureau Sponsors Proposition 98,
Claims it Will Have no Impact on State Water Projects
• But, Western Growers Association Opposes
Proposition 98, Concluding it Will Endanger State
Water Projects
•
ƒ With regard to conversion of private water facilities to
public:
Little doubt language designed to preclude just that
• Issue will be how far government needs to go to
change the use sufficiently to circumvent restriction
•
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Proposition 99
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Proposition 99:
A Practical Look
ƒ Narrowly Tailored to Address Perceived Problems
With the Law Following Kelo
ƒ Designed to prevent the use of eminent domain to
transfer owner-occupied residences to another
private party (i.e., curtails redevelopment efforts)
ƒ Creative Twist: Contains a “Kill Provision” that
Provides that it Trumps Proposition 98 if Both Pass,
but Proposition 99 Receives More Votes
40
Proposition 99:
A Practical Look
ƒ Critics Claim:
¾Proposition 99 Contains no Real Reform
¾Designed Purely to Confuse Voters in an
Effort to Defeat the “Real Reform” of
Proposition 98
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Tales from the
Trenches, Part 3
_________________
Propositions 98 & 99
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Propositions 98 & 99:
Legal Skirmishes, Round One
ƒ In Round One, the League of Cities sued to
Challenge Proposition 98’s Title and Description,
Claiming the Absence of Any Mention that
Proposition 98 Abolishes Rent Control in the Title is
Misleading
ƒ Sacramento County Superior Court Rejected the
Challenge, Finding:
•
Elimination of Rent Control is an Auxiliary or
Subsidiary Matter
•
Not Misleading
44
Propositions 98 & 99:
Legal Skirmishes, Round Two
ƒ In Round Two, Howard Jarvis Taxpayers Association
Filed Complaint with the Fair Political Practices
Commission to Challenge Campaign Financing for
Proposition 99
ƒ Claims:
•
Laundering Campaign Money
•
Failing to Disclose Donors’ Identities
•
Illegally Tapping into Taxpayer Funds
ƒ Complaint Still Pending
45
Proposition 98 Key Proponents
and Proposition 99 Opponents
ƒ
Howard Jarvis Taxpayers’ Association
ƒ
California Republican Party
ƒ
National Tax Limitation Committee
ƒ
Association of Realtors
ƒ
California Business Alliance
ƒ
California Farm Bureau Federation
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Landlord Organizations
• Apartment Owner Assoc. of California
• California Mobilehome Parkowners Alliance
46
Proposition 99 Key Proponents
and Proposition 98 Opponents
ƒ
League of California Cities
ƒ
California Democratic Party
ƒ
U.S. Senator Diane Feinstein &
U.S. Speaker of the House Nancy Pelosi
ƒ
California Redevelopment Association
ƒ
Metropolitan Water District of Southern California
ƒ
Renters’ Organizations, including Housing California &
California Housing Consortium (CHC)
ƒ
Environmental Organizations, including National Wildlife
Federation, Sierra Club California & Audubon California
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ACWA: Where Does it Stand?
¾ Opposes Proposition 98
¾ No Public Position on Proposition 99
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Propositions 98 & 99:
Will They Pass?
PUBLIC POLICY INSTITUTE OF CALIFORNIA (PPIC)
Survey Results – March 26, 2008
All Likely Voters
YES
NO
Don’t Know
Proposition 98
37%
41%
22%
Proposition 99
53%
27%
20%
49
Propositions 98 & 99:
What Happens if they Fail?
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Nuts and Bolts
_________________
Eminent Domain
Procedures 101
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Eminent Domain Steps & Timing
Step
Cumulative Timing (months)
a) Pre-Offer
•
Notice of intent to appraise
•
Meeting with appraiser
0
Approx. 1
b) Offer
•
Written offer
Approx. 2
•
Negotiation
¾ Offer up to $5000 towards
owner appraisal
¾ Provide information pamphlet
Approx. 3
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Eminent Domain Steps & Timing
Step
Cumulative Timing (months)
c) Resolution of Necessity
and Filing of Litigation
•
•
Notice of hearing and
hearing on Resolution of
Necessity
Filing and service of
complaint
Approx. 4
Approx. 5-6
d) Possession
•
Order of Prejudgment
Possession (significant
change in the law here)
Approx. 9 (but
uncertain)
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Eminent Domain Steps & Timing
Step
Cumulative Timing (months)
e) Litigation Timing
•
Landowner achieves withdrawal
of deposit
Approx. 7
•
Evaluation conference/trial
setting conference
Approx. 10
•
Discovery regarding appraisal
witnesses
Approx. 11
•
Final offer and settlement
conference
Approx. 14
•
Trial
Approx. 15-24
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Traps for the Unwary and How
to Avoid Them:
Timing of Possession
ƒ Recent changes have dramatically increased the time
it takes government to obtain prejudgment
possession
ƒ Many right-of-way agents do not understand the new
rules and can get project timeline in trouble because
they wait too long to commence action
ƒ Solution: Make sure everyone involved in right-of-
way acquisition process knows the new rules and set
a firm deadline by which condemnation process must
commence
55
Possession: Best Case Timing
Step
Cumulative Days
Notice of Intent to Appraise
0
Appraisal
30
Written Offer
35
Negotiations
45
Notice of Hearing on Resolution of Necessity
45
Adopt Resolution
65
File Condemnation Action
66
File Motion for Possession
66
Hearing on Motion for Possession
166
Effective Date of Order of Possession
196 days
56
Traps for the Unwary:
Precondemnation Procedures
ƒ New rules about what government must do before
passing Resolution of Necessity
ƒ Failure to follow new rules could give landowner a
viable right to take challenge
ƒ This can be devastating, especially in light of the
timing of possession rules we just discussed
ƒ Solution: Circulate checklist to right-of-way agents
listing all the things that must happen before
Resolution of Necessity
57
Precondemnation Checklist
9 Offer of compensation
9 Summary of appraisal (with recent date of value)
9 Notice regarding $5,000 payment for landowner
appraisal
9 Well-supported justification for prejudgment
possession
58
Traps for the Unwary:
Water Facilities
ƒ Special rules apply when condemning existing
water facilities
ƒ “More Necessary Public Use” analysis
59
Questions?
K. Erik Friess
Rick E. Rayl
Nossaman Guthner Knox & Elliott LLP
18101 Von Karman Ave., Suite 1800
Irvine, CA 92612
Phone: 949-833-7800
Email: [email protected]
Nossaman Guthner Knox & Elliott LLP
18101 Von Karman Ave., Suite 1800
Irvine, CA 92612
Phone: 949-833-7800
Email: [email protected]
Meg Catzen-Brown
Nossaman Guthner Knox & Elliott LLP
915 L Street, Suite 1000
Sacramento, CA 95814
Phone: 916-442-8888
Email: [email protected]
www.nossaman.com/eminentdomain
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